Are you starting out in business and need to open a business bank account? Or are you an established business that is considering a change? It is important to do your research when considering which banking option is right for your business. You should think about what your business banking needs are and why, as there are many different options.
What is a business bank account?
A business bank account works in a similar way to a personal bank account, but the main difference is, is that a business account is dedicated to your business transactions. You’ll still be able to make debit card transactions, set up payments and pay in cheques with your business bank account, just like you can with your personal account.
Do you need a business bank account?
If you’re the director of a limited company, you are legally required to keep your business and personal finances separate so you will need a business bank account. This is because a limited company is a separate entity from its director.
If you are a sole trader or freelancer, you are not required to open a business bank account. In the eyes of the law, there is no separation between a sole trader and its proprietor: they are one and the same. However, if a sole trader uses the same bank account for business and personal transactions, it can be difficult to separate the transactions when it’s time to do the tax return. This may result in inaccurate taxes and increased accountancy fees. For this reason, it’s best to keep your business and personal finances separate.
What type of bank account is right for your business?
These days, there is a lot of choice out there and banking has changed in recent years with the introduction of online banks. You need to consider how you will be using your business account to decide which bank is best. Are you tech savvy and happy to bank online or do you prefer the traditional high street option? The online only options are usually cheaper than their traditional counter parts, but both options have pros and cons, and each bank does things slightly differently. Some banks charge a monthly fee and all transactions are free; other banks won’t charge a monthly fee but you will be charged for making payments. Does your business need to bank cash? If so, a high street bank might the best option for you. Does your business accept cheque payments? Different banks have different processes for paying in cheques. For example, you can scan cheques to the value of £500 with Starling, and Santander provides prepaid envelopes to pay cheques in via the post.
Another thing to consider is the accounting integration. Are you currently using a cloud accounting software such as Xero? If so, it is beneficial to choose a business bank account that integrates with your software. This will make the accounting process more streamline and less time consuming.
If you are considering opening a new business account, it is worth spending some time looking at the options before you decide which bank will be best for your business. When you are ready to make the application, you can do this online with most banks and some banks still accept in-person applications. You will need to provide personal details, financial details and incorporation certificates as well as ID’s.